Drills Flashcards
Life Insurance Law is derived predominantly from
The general law of contracts
Which of the following statements concerning common law and civil law is correct?
1) Civil Law is based on the enactment of a comprehensive code
2) Common Law is derived from English law
3) Civil Law decisions are based on code rather than precedents in case Law.
4) Common Law is grounded in the principle of stare decisis.
5) Stare decisis means courts can be expected to follow previous decisions of same or higher-level courts in same jurisdiction.
An insurance contract is generally
A) An aleatory (once may receive a value out of proportion), unilateral contract in which only the insurance company makes an enforceable promise.
B) Not commutative (each party expects to receive equivalent of what he or she gives)
Which of the following are always a party to a life insurance contract?
There are 2 parties of a life Insurance: owner and the insurance company
Which of the following statements concerning the creation of a life insurance contract is correct?
A) There must always be a manifestation of mutual assent before a life insurance contract is created
B) The insurance company, the agent or the prospect can make the offer
C) Payment of the 1st premium, when accompanied with the application, may be considered an offer
D) The contract is ineffective during the 10 day period, when given a 10-day free look
If the applicant is the prospective insured, which of the following statements concerning the use of an insurability type of conditional receipt is correct?
A) The applicant’s insurability is determined in accordance with the general underwriting rules of the insurance company
B) With the insurability type of receipt, Coverage is effective when the applicant is found to be insurable.
C) The applicant makes an offer without conditions to the insurer
D) If the applicant is found to have been insurable at the date of application, coverage applies retroactively even if the applicant dies.
Which of the following constitute the consideration for a life insurance policy?
The insurer’s promise to pay the death benefits
Which of the following statements concerning misrepresentations is correct?
A) A misrepresentation must always be material in order to have grounds for rescission of a contract.
B) Misrepresentation makes a contract voidable, not necessarily void
Which of the following statements concerning concealment is correct?
Under U.S. law, a concealment must generally be both material and fraudulent to permit an insurer to void a life insurance contract.
Which of the following legal concepts is most similar to the doctrine of waiver?
Estoppel
Which of the following statements concerning a life insurance company’s responsibility for the acts of its agents is, in general, correct?
An insurer is presumed to know what its agent knows about matters of underwriting significance, whether or not the information is communicated to the company by the agent.
Suppose a life insurance policy contains an incontestable clause that makes it incontestable after it has been in force during the lifetime of the insured for 2 years. If the insured dies during the first year of the contract, which of the following statements is correct?
The insured’s death during the contestable period suspends the operation of the incontestable clause and fixes the rights of the parties as of the date of death.
Which of the following statements concerning contracts of adhesion and life insurance contracts is correct?
As a party to the contract, a prospective policyowner has the right to reject the contract.
Which of the following statements concerning standard policy provisions is correct?
Insurance companies select the actual wording of the provisions, subject to state approval
Which of the following is the standard length of the grace period contained in insurance contracts?
The standard length of the grace period is 31 days, but if the last day of the grace period falls on a nonbusiness day, the period is usually extended to the next business day.
Which of the following statements concerning insurance contract renewal premiums is correct?
When there is evidence of timely mailing, a premium will be considered paid on time even if it is delivered late by mail.
Which of the following statements concerning property law is correct?
The law of property is divided into the two major subdivisions of real property and personal property.
Jack and Jill have always lived in the same community-property state throughout their lives. Which of the following items acquired during their 20 years of marriage constitutes community property?
a beach home purchased with their combined employment savings and titled in Jack’s name alone
Which of the following is a remedy or legal solution for an action filed at law?
money damages
Which of the following statements concerning a killing of the insured by the beneficiary is correct?
In a criminal trial of the beneficiary, the standard of proof is proof beyond a reasonable doubt.
At her death Karen owed Martha $10,000. Although Karen’s estate acknowledges the validity of the debt, the estate has insufficient funds to satisfy the debt. The estate offers Martha $4,000 as payment in full for the debt. If Martha accepts the offer, which of the following documents will the estate require her to sign?
Release
Which of the following statements concerning primary beneficiaries is correct?
Primary beneficiaries have the first claim to the insurance policy proceeds upon the insured’s death.
Suppose Sam Greene, the insured, named his two sons, Ronald and Ira, as primary beneficiaries of his life insurance policy and named no contingent beneficiaries. Also suppose that Ira died before his father, leaving a son, Ralph, and a daughter, Marie. If Ronald survived his father, in which of the following cases would Marie receive a share equal to 25 percent of the proceeds of Sam’s policy when her grandfather died?
if the beneficiary designation directed that the proceeds be distributed per stirpes
If the beneficiary designation is revocable, the majority rule is that the policyowner can assign the life insurance policy
without the consent of the beneficiary
Which of the following statements concerning the rules of law developed to settle disputes arising over multiple assignments of the same interest is correct?
An assignee not guilty of fraud will be permitted to retain any proceeds that may have been paid to him or her.
Which of the following types of state exemption statutes is concerned solely with the protection of life insurance proceeds against the claims of the beneficiary’s creditors?
a spendthrift statute
Which of the following statements concerning the law of agency is correct?
An agent has a duty to act solely for the benefit of the principal.
Which of the following statements concerning agency authority is correct?
The primary distinction between apparent and actual authority is that apparent authority is determined by the reasonable perceptions of third parties.
Which of the following statements concerning the effect of the Securities Act of 1933 on insurance products classified as securities is correct?
The primary impact of the act on insurance agents is that a prospectus must be given to applicants.
Which of the following statements concerning a durable power of attorney is correct?
A durable power of attorney ceases to be effective at the time of the principal’s death.
Which of the following statements concerning the life insurance policies of a decedent-insured is correct?
An insurance company always requires a copy of the insured’s death certificate prior to distributing proceeds to a beneficiary.
Which of the following statements concerning ethics and the law is correct?
Ethics requires a person to disclose the truth in his or her business activities.
Which of the following statements concerning the rules of statutory construction is (are) correct?
I. If the language of a statute is plain and unambiguous and its meaning is clear and definite, there is no room for judicial construction.
II. All parts of a statute must be considered in any attempt to ascertain its meaning.
Which of the following statements concerning contracts is (are) correct?
A contract creates a binding promise.
Which of the following statements concerning state statutes that confer the legal capacity on minors to enter into valid life insurance contracts on their own lives is (are) correct?
Legal capacity is conferred only on minors who satisfy an age requirement.
Which of the following statements concerning life insurance contracts is (are) correct?
Once a life insurance policy is issued, the entire contract is contained in the policy.
The test of materiality for a representation can be based on which of the following?
I. prudent insurer standard
II. individual insurer standard
Suppose that an agent who is authorized to do so accepts an insured’s promissory note in payment of the first premium for a life insurance policy. Also suppose that there is no forfeiture provision in the note, in the policy, or in the premium receipt. In this case, which of the following statements is (are) correct?
A) The note is considered to be absolute payment of the premium
B) the insurance company is limited to its rights on the note in the event that the note is not paid at maturity.
Which of the following statements concerning an insurance contract issued by an insurer in a state where it is not licensed to do business is (are) correct?
The contract is unlawful.
Law allows the insured, or the insurer, to option to avoid or enforce the contract.
Which of the following statements concerning an assignment of a life insurance policy procured by the insured is (are) correct?
The majority of courts have held that where there are successive assignments of a policy, the insured need not give his or her consent to the assignments.
The assignee doesn’t have to have an insurable Interest.
Which of the following statements concerning legislation directed at life insurance is (are) correct?
Most states have enacted laws that convert statements in the application from warranties into representations
A life insurance company may obtain an adjudication of its power to rescind a contract by which of the following methods?
I. defending a judicial proceeding brought by the beneficiary to recover on a policy
II. instituting a suit in equity to obtain a decree of rescission
Which of the following statements concerning the prudent-insurer standard used by the courts to test the materiality of misrepresented facts is (are) correct?
—Courts may attempt to test the materiality of the misrepresented facts by referring to the underwriting practices of insurers generally or by referring to the practices of the particular company involved in the litigation.
—Under the prudent-insurer standard it is the judgment of objective experts on underwriting practices from other companies that is substituted for the subjective opinions of the officers of the company that accepted the risk.
Which of the following statements concerning a nonwaiver clause in a life insurance contract is (are) correct?
I. It usually states that only certain specified representatives of the company have the power to modify the terms of the contract.
II. It generally requires that any modification of the contract must be evidenced by a written endorsement on the contract.
Which of the following statements concerning the incontestable clause in life insurance contracts is (are) correct?
I. It reflects the belief that a policy’s beneficiary should not be made to suffer for mistakes innocently made in the application.
II. It is based on the theory that after the insurer had a reasonable opportunity to investigate the circumstances surrounding the issuance of a policy, it should thereafter relinquish the right to question the validity of the contract.
In which of the following cases would an insurer generally be permitted by the courts to contest the validity of a life insurance contract?
A) the original purpose of the incontestable clause was to protect the beneficiary of a life insurance policy against innocent misrepresentations or concealments made by the insured. The company would not be able to contest the contract’s validity based upon an innocent misrepresentation.
B)Charges of fraud by the insurer are precluded by the clause for any policy in force after the incontestable period.
After a life insurance policy’s contestable period has expired, the policy’s incontestable clause generally will bar which of the following?
A) a contest of the validity of the policy’s disability benefit provision when the provision is not specifically excluded in the policy’s incontestable clause
Which of the following functions is (are) performed by a prospective policyowner in the creation of a life insurance contract?
I. payment of the initial premium
II. specification of the type of contract
Which of the following statements concerning reinstatement provisions in life insurance contracts is (are) correct?
This right is valuable to both the policyowner and the insurer.
Which of the following statements concerning insurance contract presumptions is (are) correct?
A) A rebuttable presumption is a fact that is assumed to be true unless there is convincing evidence to the contrary available.
B) a conclusive presumption is a presumption that is considered to be true and that cannot be rebutted by contrary evidence.
Which of the following statements concerning the backdating of insurance policies is (are) correct?
A) An insurer may backdate a policy so that the insured is treated as having purchased the policy at a younger age.
B)a policy cannot be backdated for more than 6 months before the application date.
Which of the following statements concerning systems of property law in the United States is (are) correct?
A) Community-property law came to this country from France and Spain, not England.
B)The common law is the general rule in the U.S. and has been adopted by all but nine states.
Which of the following statements concerning exoneration statutes is (are) correct?
A) Exoneration statutes apply only to community-property states.
B) the purpose of exoneration statutes is to provide liability protection to insurers from having to give proceeds to unknown claimants.
Betty and Ben are siblings and own insurance policies on each other’s lives. Ben has mysteriously disappeared. After a period of time, Betty, as the named beneficiary of Ben’s life insurance policy, filed a death claim. The insurance company is not satisfied that the information given by Betty provides adequate proof of death and has denied the claim. Which of the following options is (are) available to Betty?
A) Betty can petition the court to declare Ben dead.
B) Betty can sue the insurance company for nonpayment of the death benefit.
Which of the following statements concerning the assignment of policy proceeds to a third party is (are) correct?
An assignment of proceeds is often done when the policy is used as collateral for a loan.
Which of the following statements concerning the owner-applicant of a life insurance policy is (are) correct?
A) The owner-applicant may either designate himself or herself as beneficiary or designate someone else to receive the proceeds payable at maturity.
B) The owner-applicant must have an insurable interest in the insured at the inception of the contract, not at the date of the insured’s death.
Which of the following statements concerning beneficiary designations in a life insurance policy is (are) correct?
A) If the policyowner does not have the unilateral right to change the beneficiary, the designation is irrevocable.
B) A revocable beneficiary has no enforceable rights in the policy prior to maturity and cannot interfere in any way with the exercise by the policyowner of his or her rights in the policy.
Where there is dissociation from ownership rights in a life insurance policy, the insured always has the right to do which of the following?
A) They cannot designate and change the primary and contingent beneficiaries
B) They cannot assign the policy”
Which of the following statements concerning the federal government’s rights in collecting a tax lien when the owner of a life insurance policy owes federal income taxes is (are) correct?
The federal government may require the insurance company to withdraw the policyowner’s policy loan values up to the amount of the tax.
Paul owns a small construction firm. David, Paul’s employee, has the job of visiting prospective work sites to calculate and prepare estimates for the company’s future construction work. Part of David’s job includes signing contracts with customers on behalf of the company. Which of the following statements concerning David’s capacity to be an agent for Paul is (are) correct?
A) When an agent creates a contract on behalf of the agent’s principal, the agent is not a party to that contract; the principal and the other contracting party are the parties to the contract.
B) An agent need not have contractual capacity to create binding contracts for the principal.
Which of the following events is (are) generally considered an invasion-of-privacy tort under current law?
a wiretap on a person’s home telephone
Which of the following statements concerning living wills is (are) correct?
Many state statutes grant some immunity to health care providers who act in accordance with a patient’s living will
People coping with death often experience certain identifiable stages of emotions. These emotional stages generally occur in which of the following orders?I. bargaining, depression, anger, acceptance, denial II. acceptance, denial, depression, anger, bargaining
Although each of these 5 emotions can be dominant in one or more phases and there is no definite order or duration, usually denial or anger is the first or early phase of coping with death, and acceptance is the last stage.
Which of the following statements concerning assumptions upon which insurance illustrations are based is (are) correct?
Every company today has its own formula of yield, mortality, expense, and lapse assumptions that it uses for illustrations.
All the following are forms of legislative law
1) The federal constitution
2) Statutes
3) Treaties
All of the following are required in order for a contract to exist:
1) A valid offer
2) An acceptance of the specific offer
3) An exchange of consideration
All the following statements concerning bilateral contracts are correct:
1) Most contracts in the business world are bilateral in nature.
2) Either party can sue if the other party fails to perform as promised.
3) The consideration is the exchange of mutual promises.
All the following statements concerning third-party beneficiaries of a life insurance contract are correct:
1) They may disclaim any benefits under the contract.
2) They may acquire certain rights that are enforceable against the company.
3) Their rights can be negated by any defenses available to the insurer against the owner
All the following statements concerning premiums after the first premium for a life insurance policy are correct:
1) They are not part of the legal consideration for the contract.
2) Payment of such premiums is a condition precedent to the contract.
3) The contract can come into existence be
All the following statements concerning the treatment of suicide in life insurance are correct:
1) Most states permit suicide exclusions for 2 years or less.
2) The insured’s state of mind at the time of the suicide can determine whether the death benefit is payable.
3) If there is no suicide exclusion clause in the policy, the death benefit is payable even if the insured commits suicide and intended to do so when the policy was purchased
All the following statements concerning a life insurance contract that is not supported by an insurable interest are correct:
1) It is an illegal contract.
2) The contract can be carried out according to its terms, if the insurer chooses to do so.
3) It is a wagering contract.
All the following statements concerning representations in general are correct:
1) A representation may be an oral or written statement.
2) A representation is an inducement to enter into the contract.
3) A representation need be o
All the following statements concerning general rules of agency law are correct:
1) There must be a manifestation of consent to the agency by the agent.
2) The agent is subject to the principal’s control.
3) A corporation may be a principal and appoint an agent.
All the following statements concerning general rules of agency law are correct:
1) There is no presumption that one person acts for another.
2) There must be some tangible evidence of an agency relationship.
3) The agency relationship must be created by the principal.
All the following statements concerning waiver and estoppel are correct:
1) The purpose of the concept of estoppel is to redress a wrong and to prevent inequitable treatment of one party to a contract by the other.
2) There are two broad types of estoppel- equitable estoppel and promissory estoppel.
3) Some courts treat waiver as synonymous or interchangeable with estoppel.
All the following statements concerning the incontestable clause in life insurance contracts are correct:
1) It waives most of the insurance company’s rights to dispute the validity of the contract after a certain period of time.
2) It is without counterpart in any other type of contract.
3) It is no longer the source of much litigation today.
All the following statements concerning the contest of a life insurance policy within the meaning of the incontestable clause are correct:
1) A majority of courts have held that a contest requires a court action that challenges the validity of the policy as a contract.
2) Once a policy has been properly contested, the contestable period stops running.”
3) The courts usually hold that the incontestable clause is inapplicable to contests seeking to enforce a contract’s terms.
All the following information is contained on the face page of a life insurance contract:
1) the insurer’s promise to pay
2) free-look provision statement
3) insurance company name
All the following statements concerning payments of renewal premiums by policyowners to agents are correct:
1) An insurance company is required to treat payments to its authorized agents as payments directly to the insurer.
2) The apparent authority of an agent to receive payments can exist without a grant of actual authority to the agent by an insurance company.
3) The collection of payments retained by the authorized agent of an insurance company is strictly a matter between the insurer and its agent.
Jason failed to make a timely premium payment. To prevent a policy lapse, the insurance company is willing to grant Jason an extension for payment. A typical late remittance offer by an insurer imposes all the following conditions on the policyowner;
1) The insured must be alive when the policyowner makes the payment.
2) For a payment by check, the check must be honored by the policyowner’s bank prior to expiration of the extension period.”
3) The policyowner has to submit payment of all past-due premiums no later than the latest
Generally accepted methods of premium payments by a policyowner to an insurer include all the following;
cash, check and electronic transfer
All the following statements concerning the effect of marriage and divorce on the ownership of life insurance are generally correct:
1) In a common-law state, a policyowner’s marital status has no direct effect upon the ownership interests in an insurance policy.
2) The cash value of a community-property life insurance policy is often subject to division between the parties during a divorce.
3) Under the community-property system, a policy that started out as solely the separate property of one spouse may over time acquire the characteristics of community property.”
Joe killed his brother Jack. Joe is the named beneficiary of Jack’s life insurance policy. All the following statements concerning the receipt of insurance proceeds by Joe are correct:
1) The killing must be both intentional and wrongful for Joe to be excluded from receiving the proceeds.
2) Joe may be able to collect the proceeds if it can be established that the killing was accidental.
3) If Joe can show that he acted in self-defense, he can still collect the proceeds.
Adjustments to the death benefit amount of a life insurance policy may result from all the following factors:
1) Unpaid policy loans and interest outstanding at death
2) dividends accumulated by the insurer at interest
3) riders to the policy
In determining whether death benefits are payable in the absence of clear evidence of the insured’s death, all the following criteria must be met to establish a presumption of death:
1) There is no reasonable explanation for the absence of the insured.
2) There is a total absence of communication from the missing insured.
3) A diligent, unsuccessful search for the insured was conducted.
All the following beneficiary designations generally result in the proceeds of a life insurance policy passing outside the insured’s probate estate:
1) the heirs of the insured
2) the legal heirs of the insured
3) the family of the insured
All the following statements concerning the Uniform Simultaneous Death Act are correct:
1) The act has been adopted in nearly all states.
2) The act provides that in the absence of contrary evidence each person is presumed to be the survivor as to his or her own property.
3) The act applies whether the beneficiary designation is revocable or irrevocable.
All the following statements concerning changing the beneficiary of a life insurance policy are correct:
1) Following the procedure prescribed by the company for changing the beneficiary is a condition of the contract.
2) All insurers require written notice of a change of beneficiary.
3) Policy provisions concerning change of beneficiary can be waived by the insurer under proper circumstances.
All the following statements concerning the treatment of young persons as beneficiaries of life insurance policies are correct:
1) If a minor is an irrevocable beneficiary, the minor lacks the legal capacity to consent to the insured’s request to surrender the policy or make a policy loan.
2) If the insured dies while the beneficiary is still a minor, the insurer must refrain from paying the proceeds directly to the minor since he or she is not legally competent to receive payment and release the insurer.
3) Statutes in most states provide that persons who have attained the age of 18 years have reached the age of majority and thus are competent to receive proceeds in any amount
All the following statements concerning the collateral assignment of a life insurance policy are correct:
1) A collateral assignment is nothing more than a pledge, subject to the general rules of law governing such a transaction.
2) If the pledgor of a policy dies before paying the debt for which the policy is security, the pledgee has a claim against the policy proceeds.
3) A collateral assignment is intended to be temporary in nature.
All the following statements concerning the American Bankers Association (ABA) assignment form are correct:
1) It sets forth clearly and specifically the rights that are transferred to the assignee and the rights that are not transferred.
2) It provides that the rights vested in the assignee can be exercised without the consent of any other party.
3) It limits the assignee’s rights to his or her interest, with all rights reverting to the assignor upon termination of the assignee’s interest.
All the following statements concerning the operation of the federal Bankruptcy Reform Act of 1978 and the 2005 Bankruptcy Act are correct:
1) The act exempts certain types of property, including life insurance, from creditors’ claims.
2) The act allows an individual filing bankruptcy to elect either the exemptions provided under the federal statute or those provided by the applicable state law, unless the state has opted out of the reach of the federal statute
3) If a state passes an opt-out statute as permitted by the act, its citizens may protect property from creditors only under that state’s exemption statutes.
All the following statements concerning the term capacity are correct:
1) Legal capacity is necessary for a person or entity to act as a principal or as an agent.
2) There must be the capacity to execute a contract in order to be a principal.
3) A partnership can usually act as a principal.
All the following requirements must be met for a person’s unauthorized actions on behalf of a purported principal to be ratified by the purported principal:
1) There must have been a representation of agency by the agent to a third party.
2) The principal must accept the agent’s transaction in its entirety.
3) Once ratification has been made, a contract is in effect.
All the following are levels of duties that insurance producers, as agents or brokers, owe to insureds;
expert level, generalist level, dual-agency level
All the following factors could increase the death benefit:
paid-up additions, premiums paid in advance, accumulated dividends
All the following events terminate a power of attorney:
1) the death of the principal for a durable power of attorney
2) the loss of competency of the principal for a simple power of attorney
3) the action of a competent principal to revoke the power of attorney
All of the following are common reinstatement requirements:
1) provide evidence of insurability
2) pay all overdue premiums plus interest
3) repay or reinstate any outstanding policy loans
All the following statements concerning producer communications to clients about the financial fitness of the insurer are correct:
1) Producers should inform clients of the insurer’s rating scores.
2) Producers should avoid posing as experts in the financial analysis of the insurer.
3) Producers should rely solely on published sources that have been prepared by industry experts.
All of the following were listed as top ten ethical concerns by life insurance agents:
1) failure to identify and meet clients’ needs
2) lack of knowledge to do one’s job
3) conflicts of interest between personal gain and proper performance
Which of the following has the highest political authoritativeness?
Treaties have the highest authoritativeness and are followed in order by federal statutes and federal executive orders. Administrative regulations are at the same level as federal executive orders.
Appellate jurisdiction can be defined as
the power to review the decision of a lower court
What is the lowest level court in the federal court system?
the district court
A life insurance policy is which of the following?
aleatory, unilateral, not commutative
A contract drafted by one party that must be accepted or rejected by the other party as it is written is a definition of which of the following?
a contract of adhesion
The application for a life insurance policy serves which of the following purposes?
authorizing the insurer to seek information from other sources
When a policy application is accompanied by a check for the first premium, but no conditional receipt is issued, what determines effective coverage?
the delivery date
States that prohibit accepting services for payment of insurance premiums cite which of the following as the premise?
Rebating is possible by excessive valuation of the services.
A viatical settlement is
the sale of a life insurance policy by a terminally ill insured
Which of the following is the most important reason to have the prospective insured sign the application for a life insurance policy procured by a person other than the insured?
to confirm the accuracy of the information in the application
Whether a misrepresentation is material depends on which of the following?
if its truth or falsity would affect the underwriting decision or premium level
Authority of a soliciting agent generally
expands the agent’s power
Estoppel is defined as
a loss of the ability to assert a defense because of prior actions that are now inconsistent with that defense
Waiver is defined as
the voluntary and intentional giving up of a known right
Election is defined as
a voluntary act of choosing between two alternative rights or privileges
A Nonsense release is defined as
the release of an insurer from obligations under supplemental contract riders
The free-look provisions for life insurance
allow the purchaser to return the policy and get a full premium refund
The basic purpose of the incontestable clause is to
bar the assertion of legal defenses after the evidence concerning the cause of action has grown stale and key witnesses are no longer readily available
Any ambiguities in contracts of adhesion are
interpreted in favor of the nondrafting party to the contract
The goal of making policies easier for consumers to read and understand conflicts with the goal of
having the contract interpreted to mean exactly what the drafter intended
A late remittance offer is
made solely at the insurer’s option, waives evidence of insurability for reinstatement; does not extend coverage.
The mailbox rule recognizes
premium payment as on time if mailed sufficiently in advance to reasonably expect the post office to deliver it on time
Payment of the premium to a broker (agent of the policyowner) is deemed to be
payment to no one
The no-lapse guarantee for a universal life insurance policy
may terminate if the target premium is not paid at every expected date
In the forty-one common-law states of the United States,
the policyowner’s marital status generally has no direct or automatic effect on the ownership interests in a life insurance policy
What factor precludes the insurer from recovering proceeds paid under presumption of death if the insured later reappears?
The proceeds were paid under a compromise settlement.
If there is no designated beneficiary at the time of death, what determines who gets the payable proceeds?
the contractual provision in the policy resolving the issue
Why might a beneficiary who is acquitted of murdering the insured be prevented from receiving the life insurance policy proceeds?
The evidentiary rules for civil cases are less stringent than the rules for criminal cases.
A contingent beneficiary
has a claim to the policy proceeds if the primary beneficiary predeceased the insured
An irrevocable beneficiary
1) loses all rights in a life insurance policy if he or she dies before the insured
2) collateral assignment requires consent of the beneficiary
3) the policyowner can take policy loans only if the beneficiary consents
4) beneficiary can consent to giving up the irrevocable beneficiary status.
The Uniform Simultaneous Death Act
1) presumes the insured survived the beneficiary if the order of death cannot be determined;
2) not effective in Ohio and
3) consistent with common disaster clause in policy
The purpose of the delayed payment clause in a life insurance policy is to
avoid paying the proceeds into the estate of a beneficiary who survived the insured for only a few days
Who can a life insurance policy be assigned to?
anyone that the policyowner chooses (30)
What duty does a principal have to agents?
to indemnify the agent for liabilities incurred while acting for the principal within the scope of the agency
The federal regulations governing telemarketing prohibit calls during which time interval?
9 p.m. to 8 a.m.
According to John Moyse, it is prudent and advisable for an agent to take what approach to insurance company evaluations?
Use information and ratings supplied by rating agencies without modification or embellishment.
Dr. Solomon S. Huebner believed that professionalism of insurance agents could be built most successfully with which of the following?
a code of ethics and a body of unique knowledge about insurance and personal finance
The American legal system can be classified as
a common-law system
A life insurance contract is classified as
an informal contract
In order for there to be a valid contract, which of the following must exist?
exchange of consideration and acceptance of a valid offer
The legal right of subrogation is utilized by which
property and casualty insurance companies
Which of the following is (are) parties to a life insurance contract?
The policyowner
Which type of conditional receipt is likely to result in policy issue after the applicant for coverage has died?
insurability type; If the intended insured dies before the policy is issued, the insurer will have to evaluate the case based on insurability on the date of the application. The approval type will not lead to policy issue if death occurs before insurer approval of the application.
If an agent issues an unconditional premium receipt to an applicant in exchange for his or her check, which is subsequently not paid when presented, what action then occurs?
The insurer may take steps to collect the funds; Because the premium receipt was unconditional, the insurer will have to treat the premium as having been paid regardless of whether it is able to collect the funds.
Which of the following family relationships are generally supportive of an insurable interest?
Cousin-cousin and aunt-nephew relationships are too distant to be generally considered insurable interests unless there is a financial dependency.
The test of materiality for a representation can be based on which of the following?
prudent insurer standard and individual insurer standard
Insurance law holds that which of the following is concealment?
misrepresentation by silence
Possession of an insurance company’s application blanks and receipt forms does which of the following?
It may provide the necessary elements for a presumption of agency.
Which of the following is true of medical personnel who examine life insurance applicants?
They are regarded as legal agents of the insurer
Life insurance policies in force beyond the contestable period are valid even under which of the following conditions?
1) Fraud was involved in the policy formation.
2) There were material misrepresentations in the policy application.
What is a contest of a policy?
1) a defensive action in court to deny benefits by the insurer
2) a suit by the insurer to rescind the policy in a court of appropriate jurisdiction
The principal is presumed to know which of the following?
1) information obtained by the medical examiner
2) information that the agent obtained but did not reveal to the principal
The divisible-surplus provision applies to which of the following?
participating policies only
Which of the following definitions of accidental death are most favorable to the consumer?
accidental results
Limitations on the agent’s powers are found in which of the following?
1) the policy application
2) the insurance policy
When premiums are paid by automatic premium loans, what will occur?
The death benefit will be reduced by the loan and accrued interest.
A life insurance policy is which of the following?
a chose in action
Which of the following is true in the nine community-property states?
1) Each spouse has an undivided one-half interest in all property acquired by the husband and wife during the marriage.
2) Property acquired by one spouse through gift or bequest does not become community property.
Community-property states have laws known as exonerations statutes that do which of the following?
protect insurance companies from claims of an unknown party with community property rights in a policy that has already been settled according to its terms
Adjusting the death benefit for misstatement of age could result in which of the following?
1) reducing the death benefit payable
2) increasing the death benefit payable
The share of a deceased primary beneficiary under a class beneficiary designation for his or her children is preserved by which rule?
the Connecticut rule
Which of the following statements about the per stirpes concept is (are) correct?
The Connecticut rule embodies the per stirpes concept.
Which of the following is (are) true about the reverse common-disaster clause?
1) Its use is usually tax motivated.
2) the clause presumes that the beneficiary survives the insured.
A change of beneficiary request will not be effective unless which of the following is true?
The change request is communicated to the insurer in writing.
The American rule regarding multiple assignees of the same insurance policy states which of the following?
The assignee that was first in point of time has the superior claim.
The English rule regarding multiple assignees of the same insurance policy states which of the following?
The assignee first to give notice to the insurance company has the superior claim to the proceeds.
How can death proceeds be handled under an ABA collateral assignment?
1) The assignee collects the full proceeds and distributes the excess over its own interest to the rightful beneficiaries. 2) The assignee collects only the amount of its interest in the proceeds and the insurer distributes the remainder to the beneficiaries.
The types of limitations on protected amounts of life insurance in state exemption statutes include which of the following?
1) a specified dollar amount of the proceeds
2) the benefits that can be purchased with a given dollar amount of annual premium
Intended anatomical gifts may not be accepted for which of the following reasons?
1) The intended gift may have diseased tissue.
2) There may not be an available recipient with matching blood and tissue types to those of the donor.
Failure to share financial planning information with the likely surviving family members could result in which
survivors making financial decisions that undermine the objectives of the financial plan and trigger unnecessary or inappropriate loss of asset values
State administrative bodies can do all of the following
create regulations, resolve some controversies, enforce statutes
Equitable remedies sought by insurers include all the following
bills of interpleader, reformation of a contract, rescission
The choice of applicable laws in a conflict-of-laws situation may be influenced by all of the following
a designated state’s statutes, the center of gravity for the issue in dispute, the place of contract completion
All the following statements about conflicts with an unlicensed or unauthorized insurer are correct
1) Contracts may be enforceable by the policyowner.
2) Litigation against an out-of-state insurer may be coordinated through the policyowner’s own state insurance regulator.
3) Litigation against the insurer may be initiated and tried in the state of the policyowner’s domicile.
Minors have all the following contracting capacities regarding life insurance
1) Many states grant legal capacity for purchase at age fifteen.
2) They may disaffirm a contract at any time during their minority.
3) In some states they lack capacity to own a policy on the life of another person.
A life insurance policy includes all the following
1) initial application
2) change of beneficiary requests filed with insurer
3) any application for reinstatement
All the following relationships support an insurable interest
financial dependency, debtor-creditor, business partnership
All the following statements about representations are correct
1) It is an inducement to the contract.
2) It is an oral or written statement made by a party to the contract prior to or contemporaneously with the formation of the contract.
3) It may be merely an expression of opinion or belief.
A rescission is all of the following
1) termination of the contract
2) an equitable remedy
3) the possible result of a material misrepresentation
Life insurance agents must satisfy all of the following
1) be subject to the principal’s control
2) have contractual capacity
3) be licensed by the state
Soliciting life insurance agents may have all the following agency authorities
express authority, apparent authority, implied authority;
Ex officio authority would only apply to company officers who derive their authority from their home office position and responsibilities.
An agent can be liable to the principal for any loss or damage caused through any of the following acts of the agent
Fraud, mere negligence, misconduct
All the following statements about the incontestable clause are correct
1) It is unique to insurance contracts.
2) It protects the beneficiaries after two years even if the policy was procured fraudulently.
3) It is required in life insurance contracts by the regulators.
All the following situations lack the protection of the incontestable clause
1) The policyowner/applicant lacked an insurable interest at the inception of the policy.
2) The policy was obtained with the intent to murder the insured.
3) The physical examination was taken by someone other than the insured
All the following statements about the contestable period are correct
1) The maximum allowed duration is two years (unless the insured dies within that period).
2) It gives the insurer time to investigate and rescind the policy.
3) It may delay claims settlement if the insured dies during the contestable period.
All the following provisions are required in a life insurance policy
Entire contract, reinstatement, misstatement of age
All the following provisions are required in a cash value life insurance policy
nonforfeiture, policy loan, grace period
All the following are aspects of life insurance policy loans
1) It is an advance of money from the policy cash value.
2) Interest accrues on the loan balance.
3) The loan plus unpaid interest will be deducted from the death
All of the following are common reinstatement requirements
1) provide evidence of insurability
2) pay all overdue premiums plus interest
3) repay or reinstate any outstanding policy loans
Premium payments by any of the following nonpolicyowners gives them no additional rights in the policy
the insured, the revocable beneficiary, the irrevocable beneficiary
All the following are common elements of an interpleader action by a life insurance company
1) Two or more parties claim the same death benefit.
2) The insurer has no claim on the proceeds.
3) The insurer pays the benefits to the court and asks the court to determine the rightful recipient.
All the following are equitable remedies
Interpleader, reformation, rescission
All the following factors could increase the death benefit
Paid-up additions, premiums paid in advance, accumulated dividends
All the following are criteria to establish a presumption of death
1) A diligent search for the person was unsuccessful.
2) The person has been continuously missing for 7 years.
3) There is a total absence of communication from the missing person to those who would reasonably be expected to have heard from the missing person.
4) There is no reasonable explanation for the absence.
Insurers settling a death claim with a class beneficiary designation must do all the following
1) determine all potential members of the class
2) verify the deaths of class members who predeceased the insured
3) delay settlement until all appropriate beneficiaries can be determined
All the following are approaches to the short-term survivorship of a beneficiary problem
1) use a delay clause for the beneficiary
2) use the interest-only option with contingent beneficiaries
3) use trusts to take full advantage of the marital deduction
All the following can limit the ability to change a beneficiary
1) an irrevocable beneficiary designation
2) collateral assignment of the policy
3) a court-ordered divorce decree
Problems associated with minor beneficiaries include all the following
1) A minor cannot give the insurance company a binding release.
2) A minor cannot give release to change an irrevocable beneficiary designation.
3) A guardian will have to be appointed to facilitate receipt of the death proceeds.
Ownership rights in a life insurance policy include all the following
1) to exchange a policy for another policy
2) to reinstate the policy after a lapse
3) to elect settlement options
All the following statements about state exemption statutes are true
1) They do not exempt life insurance cash values from federal tax liens.
2) They have intent to protect life insurance proceeds payable to spouses and children from most creditors.
3) They generally protect some or all of the life insurance from creditors of the policyowner
All the following are duties an agent owes to a principal
1) duty of loyalty to the principal
2) duty to obey the principal’s instructions
3) duty to exercise reasonable skill, care, and diligence in executing the principal’s instructions
Federal securities laws require that sales of variable-life and variable-universal-life policies must be accompanied by a prospectus meeting all the following requirements
1) It must disclose detailed information about the investment.
2) Accompanying sales literature must be complete and must not be misleading.
3) The prospectus must be delivered prior to or at the time of the investment sale.
4) A new prospectus must be issued every 13 months
All the following events terminate a power of attorney
1) the death of the principal for a durable power of attorney
2) the loss of competency of the principal for a simple power of attorney
3) the action of a competent principal to revoke the power of attorney
All the following are emotions associated with grieving
Denial, depression and bargaining
